Infill Industrial Garners Great Returns

LOS ANGELES—Rexford Industrial has acquired two industrial properties in infill Los Angeles markets. One is a 100% leased single-tenant property and the second is a 10.26-acre paved storage facility. Both properties were purchased in off-market transactions for a total of $15.4 million.

“We expect to receive a favorable return, and, in our opinion, one that would be above the current market returns,” Howard Schwimmer, co-CEO of Rexford Industrial, tells GlobeSt.com about the outdoor storage facility, which is located at 9615 Norwalk Blvd. in Santa Fe Springs. “Santa Fe Springs is a very dynamic market in the L.A. region with an exceptionally low vacancy rate. This is a real prime location within that market, but it is a different kind of product in that it is paved and fenced land with 26,000-square-foot high clear industrial building and an office building, so the type of user is someone who has an outside storage product.”

Rexford purchased the site for $9.6 million. It has a 447,000-square-foot storage yard along with a 26,362-square-foot industrial facility and a 12,000-square-foot, two-story office building. The current tenant will vacate the property in June 2015, but Rexford has already received unsolicited offers for tenancy. “We had a few offers already from potential tenants before we even closed the deal, and the reason being is that there is a lack of land that is undeveloped in an infill market,” says Schwimmer. “So, it is pretty rare to find something that can accommodate a land-type storage use. We expect the site will rent quickly. We have already received a lot of activity on it, and we haven't even put it on the market.”

Located at 16221 Arthur Street, the single-tenant property was purchased for $5.8 million. It sits on 2.8 acres and has a 61,362-square-foot industrial facility with 22-foot to 24-foor clear heights and good functional loading. Rexford purchased the property at an option price the tenant had in its lease. “We bought it at what we believed to be very much below market purchase price, which was facilitated through an existing tenant in the building that worked with us to buy it at an option price that they had in their lease,” says Schwimmer. “We did a five-year lease-back with them at a below market rent, which we were able to accommodate because of the below market purchase price. It is generic, so it has great future value.”  

This year, Rexford has already invested $67 million in infill industrial products in Southern California, with 70% of its portfolio in the L.A. area. Earlier purchases this year include a 153,984-square-foot property that the REIT purchased from an owner/operator for $14.1 million. “Our focus is buying in infill Southern California markets, so these are right in the bull's eye of where we want to own,” says Schwimmer. “These were bread-and-butter acquisitions in terms of what we look for and what we have been buying.”